bubble experienced in the United States for housing and commercial real
estate, which reached its peak in 2006 and burst in 2008.
This is the real spirit and real intent of the prohibition of riba/ribit in
the Jewish Bible, the Christian Bible, and the Qur’aan. In fact, based on the
LARIBA model, LARIBA may be the only finance company that would de-
cline financing a property or a business if the return on investment based on
the actual market rent of similar properties were not attractive, using mar-
ket parameters that will be detailed later.
Applying the Rule of Marking the Property to the Market Each property
has a market value, which is best defined by what its lease value would be if
it were leased on the open market. The model assumes that the property is
leased at fair market value, as defined by the location and specifications of
the property, and as mutually agreed-upon between the client and RF bank.
Here is the detailed procedure:
1.The customer is asked to research the actual long-term rental of a home,
car, property, or businesses with the same specifications and in the same
neighborhood. This can be done, in case of buying a house for example,
by calling three different real estate agents in the area and documenting
the findings. The RF bank officer does the same.
2.Based on the six data points collected above, the customer and LARIBA
agree on afair market rentvalue of the property.
3.The RF bank calculates the customer’s monthly payment. This monthly
payment consists of two parts: the RonC (portion of the rent that be-
longs to the RF bank for renting its share of the usufruct of the item)
and the RofC (repayment of the capital paid as interest-free credit to
the customer).The Unique Features of the LARIBA Shari’aa-Based Model In a riba-
based conventional banking setting, the customer will approach the bank to
ask, ‘‘If I take a loan of $240,000, and repay it over 20 years to finance the
purchase of a house, how much would the monthly payment be?’’ The riba-
based banker would look at the interest rate of the hour on that day and tell
the customer that if he or she qualifies, the bank can lend them $240,000 at
an interest rate (money rental rate) of, say, seven percent. The riba banker
would start an amortization computer program and input the amount to be
financed, the number of years, and the interest rate. The unknown here is
the monthly payment.
When the unique LARIBA model is used, the customer will be told that
the RF bank cannot calculate the monthly payment before we know the
location of the property, its specifications, and its rental/lease rate on the
RF Banking Model for the 21st Century 265